I’ve got an idea. Why doesn’t the U.S. government give $5,000 to every child born in the U.S.? The money can grow tax free, and the child can use the money for college when he or she finishes high school. Now I know what you’re thinking. That’s the dumbest idea you’ve ever heard. Well now just hold on there. Senator Clinton proposed this very idea last week at a forum hosted by the Congressional Black Caucus. While her aides were quick to point out that the idea was still under construction (also known as damage control), I think Clinton’s proposal deserves a thorough examination.
Over 4 million children were born in the U.S. in 2003 according to the Center for Disease Control & Prevention. The CDC report can be downloaded here, but I’ll warn you that it is a massive pdf file (116 pages). At $5,000 per child, the total tab in year one comes to over $20 billion. What amazes me almost as much as Hillary Clinton actually proposing such an idea is that she’s not the first! The Ford Foundation has made a similar proposal which you can read in an article called the Children’s Savings Accounts: Time to Push the Envelope. In response to President Bush’s proposal for individual Social Security accounts, some Democrats proposed setting up personal accounts for newborns instead. And last month Time Magazine proposed a similar plan.
The Baby Bond plan raises many questions:
- Will every baby receive $5,000, or just those from lower income families?
- What about children born before the plan goes into effect? In other words, do my teenagers get any of the dough?
- How will this money impact the cost of higher education?
- How much will it cost the government to administer this plan?
- How will the government fund the $20 billion annual cost of the plan?
- Will the $5,000 payment be indexed for inflation?
- Who will control the investment of the money?
- What happens to the money if the child dies or doesn’t go to college?
- Isn’t the U.S. a democracy?
So how have others reacted to Clinton’s Baby Bond proposal? Rudolph Giuliani said he thought the plan was “based on pandering to the point where I think they think the American people are stupid.” New York Conservative Party chief Mike Long said that “It’s a quick way of trying to buy votes, which is irresponsible when it comes to the economic future of the nation.” On the other side of the aisle, Rep. Stephanie Tubbs Jones, an Ohio Democrat, described the proposal as “a wonderful idea. … Every child born in the United States today owes $27,000 on the national debt – why not let them come get $5,000 to grow until they’re 18?” And Doug Muzzio, a political science professor at Baruch College, said the Baby Bonds plan is good politics “because it is a policy that has wide impact and addresses the concern and anxiety by Americans. It makes her an innovator.”
So what do you think? Do you give Baby Bonds a thumbs up or thumbs down? As for me, I’ll hold my opinion until we find out if the $5,000 also comes with a chicken in every pot.